Friday’s nights at RebelTraders is always busy with looking over weekly charts and reviewing the economic data of the week. In addition to the usual Friday evening chart analysis I am working on our new web site again.

Time has run out for me to get tonight’s full wrap up posted so please check in over the weekend and I will post the charts and the weekly commentary in parts scattered throughout the weekend.

It will be a very busy weekend here at RebelTraders with the web site work and family coming to stay… but we will get the charts and commentary posted for you.

Please check in over the weekend.

More to come…

What can one say on another down day like today except for “confidence continues to fade”.

It had been said recently that retail stocks could not go any lower as a recession was already ‘baked in’. Well lower they can go and lower they did. JC Penney (JCP) set the tone for the retail sector today with their warnings of reduced sales figures. There is still plenty of room for stocks to go lower, regardless of what the analysts and talking heads want you to believe. And today was a perfect example of that.

Financials, which are supposed to be benefiting so much from all of the Federal Reserve action just continue to go lower. And rightfully so in our view, for the banks and financial institutions are no where near out of the woods.

The full wrap up later tonight. Lisa and I want to thank you for the nice comments received today and we like hearing from our readers all over the world.

Have a great evening and check in tonight for a wrap up.

Subpoena Activity (from the wires):

MASSACHUSETTS SUBPOENAS UBS, MERRILL, BOFA OVER AUCTION BOND SALES - WIRE HEADLINE
- MA Secretary of the Commonwealth Galvin: Inquiry is looking into the role major investment banks played in auction rate market securities and whether investors were properly informed of risks and if those securities were appropriate for those investors.

It looks like Lehman’s (LEH) may have been duped (Nikkei wire):

LEH MAY LOSE ¥24B BACKED BY FAKE MARUBENI DOCUMENTS - WIRE CITES NIKKEI
- As a result of a investment deal in Japan that involved forged documents said to be from Marubeni Corp. (8002.TO), The Nikkei reported in its Saturday morning edition
- Senior officials at medical consulting company Asclepius Ltd., a wholly owned unit of LTT Bio-Pharma Co. (4566.TO), solicited funds from investors, according to sources familiar with the matter.   Through an investment partnership, the money was meant to go to hospitals and other institutions for equipment purchases. When soliciting investors, the Asclepius officials presented a certificate of guarantee from Marubeni stating that the trading company would be responsible for shouldering repayment if Asclepius could not.

And on the bright side (not financial, but I want good news):  Burger King (BKC) is planning a new restaurant format and will offer ten types of Whopper’s.  I admire their pluck in trying to find a way to pull in more customers by offering more choices.  Too soon to say this plan will work, but it’s nice to see innovation at work here.  Good luck to them!

Note reading of current conditions versus forward looking conditions number.  It just keeps getting lower. Not a lot of confidence out there.

MARCH FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 69.5  V 70E; LOWEST READING SINCE EARLY 1992
- 1 year inflation expectations at 4.3% v 3.6% in Feb
- Current Conditions: 84.2

The Government data released at 8:30am shows consumer spending at 0.1% m/m. This is the slowest pace of growth in close to a 18 months. Personal income came in at 0.5% m/m. I am still working on getting the raw data to see how they arrived at that figure.

But the biggest news of the morning did not come from the Government, it came from JC Penney. For our international readers… JC Penney is a  large store with retail outlets throughout the United States and caters to the average middle class person. This morning they warned that they were cutting their earnings forecast yet again.

JCP: LOWERS FORECAST, GUIDES Q1 EPS AROUND $0.50 V $0.75 EXPECTED
- Sees low double digit SSS decline for March; high single digit decline in Q1 SSS.

CEO said that shopping over the Easter Holiday was well below their hopes.

This will have a rather large impact on the retail (RTH) sector today. KB Homes, a home builder here in the US reported earnings this morning:

KBH:

REPORTS Q1 -$1.47 V -$1.17E (EX-ITEMS), R $794M V $805.7ME
- Note that headline earnings exclude a pretax charge of $223.9M ($2.00/shr).
- Deliveries 2,928 (-43% y/y).
- Average selling price $248.2K (-7% y/y).
- Housing gross margin -6.2% vs. +15.5% y/y (-4.3% in prior quarter).
- Cancellations 53% vs. 34% y/y (58% q/q).
- Backlog at Feb 29 3,843 homes (-57% y/y) (-40% q/q).

Listening to the Government they make you think all is rosy and well, when the private sector reports we get the real story.

On CNBC this morning the President’s economic advisor, Mr. Lazear, said that job growth was great over the past 52 months. However he does not discuss ‘trends’ like we analyze here and show you. The chart below shows how employment growth never reached the strength of the previous growth period. In technical analysis this reveals to us an even worse job situation is unfolding than the Government will say. It was interesting how Mr. Lazear failed to even mention the recent data from the Bureau of Labor Statistics showing the big rise in layoffs. Nope, said nothing about it. See our post from last night for the layoff data chart.

It is getting more and more difficult each day to come up with ways to explain something that just continues to get worse. How about I just say…

"the markets remain teetering on the edge of an abyss"

Now you say to yourself.. ‘wait a minute Chuck, are you not being just a bit too harsh here’? No, I’m not. Lisa and I are realists. We see things as they are and not how we want them to be. Technical analysts only look at the charts, fundamental analysts only look at figures. We look at both and form a balanced opinion of what the markets are doing. Technical analysis is a powerful tool and in a healthy market it can be used almost exclusively to find potential trade setups. But, when economic conditions become unstable you can not live by the chart alone. You must incorporate a fundamental study into your analysis in order to see the big picture.

What we strive to do here every day is provide you, our readers, a balanced and objective view of what we see in our technical analysis AND fundemental analysis. A perfect example of this is when we apply technical analysis to fundamental data in order to determine new trends developing or ending. Such as in the case of the many economic graphs we have presented over the past many months now. Some ‘technicians’ in the market only know how to look at a stock chart, some fundamental analysts don’t even know how to read a stock chart. So by bringing both talents together, Lisa and I feel we are delivering to you the most objective view possible. At least that is what we strive to do everyday. This is why we are "Rebel" traders… to be different from the rest, to be unique, and to be committed to one thing… helping people all around the world to understand the markets better and in turn profit from them.

Part of profiting from the markets is knowing when the time is right to trade actively, to sit on the side lines in cash, or to just take a position and stick with it. Some would say that high volatility presents great opportunities for traders. That is both true AND untrue, it depends on your skill and your time frame. For someone new to the markets it is most definitely NOT the time to be trading actively. For an experienced day trader it presents lots of opportunities. But unfortunately some of the mainstream media touts volatility as an excellent opportunity without taking into account the skill levels of their viewers, and even some stock picking web sites try to profit in this volatility to only keep fighting an uphill battle and losing money every day.

Being a ‘trader’ does not mean we have to trade something every day. No, being a trader means we move in and out of stocks as we see fit, period. ‘Traders’ can mean anything from being in a stock for only minutes all the way up to many months. The term ’swing trading’ is one aspect of ‘trading’ which works well in a healthy market where you move from one stock making a sudden move to another. But for swing trading to work successfully you have to have a healthy trend from which to start with.

In extreme turmoil and uncertainty, like we have now, the best thing we can do for our readers and subscribers is to strongly encourage ‘capital preservation’. While capital preservation is always priority one, it becomes paramount when volatility and uncertainty are at extremes.

Yesterday we received the weekly jobless claims, and they were slightly lower. The reason we did not get excited about the slight drop in those weekly jobless claims is that we continue to watch the broader picture. For example, last week on Good Friday (March 21) the Government issued their monthly ‘mass layoff’ data. This data seems to never make it to the media or press. The ‘mass layoff’ data is released every month by the Bureau of Labor Statistics and it provides us a deeper look inside the job market. This data shows the number of ‘events’, an ‘event’ is a company that lays off 50 or more employees at a single shot. And the number of these events is tracked by the Government. In the chart below you will see the latest data of mass layoff events. As you can clearly see the number of mass layoffs is increasing significantly. And this in turn will propagate into the unemployment data. So while the weekly jobless claims will always fluctuate, other data clearly points to a rise in unemployment levels.

(Data Source: Moody’s Economy.com & US BLS)

The numbers behind the chart are that in January there were 1,438 mass lay off events and in February that number had grown to 1,672. That is a huge 16.2% increase in one month!

At the top of tonight’s commentary I said "the markets remain teetering on the edge of an abyss". I said this because of what we see, not to be an attention grabber. In technical analysis the charts tell us that the markets are very undecided here, with a leaning towards the down side. And the fact that the indices are still close to their recent lows it leaves the market little breathing room should the down ward momentum pick up again. And if the recent lows fail to hold it will spark a whole new wave of selling. And trust us, if those levels fail the volume on that sell off will be huge. And couple this with the economic conditions unfolding almost daily it leaves the markets hanging on by a thread.

The main trend of the markets is down, and we have taken our stand by going short on the Dow Industrials (at the technical entry point of 12750) and that is where we will stay until the trend tells us otherwise. At this time, the chances of more down ward moves is still higher than the chances of a bull market returning. I have used the word "unprecedented" quite a lot over the past couple months to describe certain events. But I use it because it is true. The events unfolding before us is indeed "unprecedented".

I will tell you that some people are actually comparing these events to the Great Depression, in that the final outcome of this credit implosion and housing market crisis could lead to a similar outcome. While we are not prepared to go that far, we certainly understand how these people can make the comparison, and we are not laughing at them for thinking the way they are. Many investors and traders are new to the markets, thanks to the Internet. And many of these new traders don’t understand what a real bear market is like, or just how important the events in the financial markets (banks, brokers, investment institutions,etc.) really are.

We truly are at the edge of an abyss. Can the Federal Reserve rescue the economy from this abyss? Will the desperate actions of the US Government actually overshoot and create an even bigger mess in the long term? Will the declining world markets continue to bring us down even further? Everything is coming together in one big and powerful "perfect storm". All of the ingredients to trigger this storm are swirling around us, it is a matter of time before they come together unless the Governments all around the world can work together to stop it. Unfortunately with each passing day it appears like a train running out of control.

Speaking of countries all around the world, RebelTraders is proud to be growing each day and we have regular readers from many parts of the globe. A big welcome and hello to our readers in the following countries:

(Countries reported by our server as visitors to our site on a regular basis.)

Welcome to everyone!

Netherlands, Canada , Spain, South Africa (Republic of), Cyprus (Republic of), Czech Republic, Finland, India (Republic of), Austria, Germany, Australia, United Kingdom, Sweden, United States of America, Russian Federation, Japan, Brazil (Federative Republic of), Singapore (Republic of), Indonesia (Republic of), Israel (State of), Romania, Denmark, Argentine Republic, Portugal, China (People’s Republic of), Italy, Switzerland, France, Latvia (Republic of), Thailand, Mexico, Dominican Republic, Belgium, Malaysia, Turkey, Poland (Republic of), Estonia (Republic of), United Arab Emirates, Taiwan, Greece, Nicaragua, Philippines (Republic of the), Hungary (Republic of), New Zealand, Pakistan (Islamic Republic of), Norway, Lithuania (Republic of), Luxembourg, Moldova (Republic of), Peru, Saudi Arabia (Kingdom of), Slovak Republic, Trinidad and Tobago, Zimbabwe (Republic of), Andorra (Principality of), Bulgaria (Republic of), Hong Kong, Ireland, Bermuda, Cocos (Keeling) Islands, Côte d’Ivoire (Republic of), Chile, Costa Rica, Egypt, Ghana, Korea (Republic of), Morocco (Kingdom of), Monaco (Principality of), Soviet Union, Ukraine, VietNam

Tonight’s wrap up is being worked on at this time… check back later tonight.

The rumors are running rampant in the financial sector.  The indices dropped into the close, since lately it seems, where there’s smoke, there’s fire.  Who wants to get caught in a long position when there is so much uncertainty in the financial’s?  Was collateral rejected by the Fed’s?  I don’t know, and I’m not sure we’ll get confirmation on that.  Many expect the Fed to be able to avert a financial meltdown.  Maybe they can, but they can’t stop the consequences that must be borne by those who created this mess…the banks, mortgage lenders and investment brokers.  Unfortunately, many others will be hurt, as well, but you can’t have this catastrophe end with everyone left whole.  Reality will not permit that.

It’s a good thing that I love my job and I even love this market, although I admit it’s wearing me out, too.  From a psychological perspective, I want to remind anyone who’s actively trading this market to take time away and have some fun.  There are times you need to shut down the computer, turn off the TV and put away the trading books.  Do something totally unrelated to the markets and you’ll come back to them with a fresh perspective.  The crazier the action and the news has become, it’s been more important  to keep a clear head.  Just my two cents.

The TSLF Auction (newest government Pawn Shop) had primary dealers submitting $86.1B in bids.  This afternoon sell off is said to be attributed to a rumor that some of the collateral was rejected.  $200B was available, so the fact that only $86.1B was loaned had been seen as a real positive.  But, if the rumor is true that collateral was rejected and that is the reason for the low number, then that is not good at all.

TSLF RESULTS: PRIMARY DEALERS SUBMITTED $86.1B IN BIDS, BID-TO-COVER RATIO 1.15
- Stop out rate at 0.33%

Loan sales fell, too:

Q108 US SYNDICATED LOAN SALES FELL TO $166B -55% Y/Y,  LEVERAGED LOANS FELL TO $54.1B -74% Y/Y
- Loans backing leveraged buyouts fell to $5.4B -88% y/y
- Note: JPM leads tables for syndicated loans, BAC leads in leveraged loans<JPM BAC>

Here’s a bit of what he’s saying:

MAY NOT SEE PICK UP IN GROWTH IN 2H AS PREVIOUSLY EXPECTED, HEADLINE AND CORE INFLATION ARE ABOVE LEVELS CONSISTENT WITH LONG RUN PRICE STABILITY
- Q1 GDP to show little, if any growth, possible to ’skirt’ recession
- Financial conditions have not yet stabilized, financial stability should be ‘essential concern’ at this time
- Clear US economy is in slowdown that resembles past episodes that became recession
- Says housing slump and credit crunch may chill business and consumer spending over rest of 2008, growth recovery may be delayed until 2009

The market is virtually floating around, no real conviction anywhere.  Short term traders are squeezing out pennies wherever they can, but I see trader fatigue setting in as the rollercoaster rides are getting to be too much to handle on a daily, let alone minute by minute, basis.